House backs new controls on key mortgage buyers

Bush wanted bill to give regulators more authority

Published 10:00 pm, Tuesday, May 22, 2007

WASHINGTON -- Legislation to tighten federal oversight of the two biggest buyers of home mortgages, Fannie Mae and Freddie Mac, cleared the House on Tuesday.

However, the bill could lose the critical support of the Bush administration because of a new provision trimming the authority of federal regulators.

The vote in the House was 313-104 for the measure providing for stricter federal supervision of the two government-sponsored companies, which together finance or guarantee more than three-quarters of U.S. home mortgages. The legislation also would create a housing aid fund -- worth as much as $3 billion -- to be financed by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp.

All 104 opposing votes came from Republicans, who were sharply split. Ninety other GOP lawmakers joined the unified 223 Democrats to sweep the bill to passage.

The legislation is the product of a compromise between majority Democrats in the House and the administration.

Multibillion-dollar accounting scandals that roiled Fannie Mae and Freddie Mac in recent years brought demands for tighter government supervision and cuts in the companies' massive mortgage holdings, now worth a combined $1.5 trillion.

But in House action Thursday, the bill was reshaped in a way that lessens the power of the new federal regulator of Fannie Mae and Freddie Mac over their mortgage holdings, compared with an earlier version that moved through the House.

The Bush administration has insisted that the new regulator have the discretion and authority to reduce the companies' mortgage portfolios. White House support is considered crucial to the bill's prospects in the Senate and for eventual congressional passage.

"I believe our nation needs a stronger regulatory structure and a deeper commitment to meeting the housing needs of the American people," Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee, said in a statement issued after the vote. "I am committed to continuing to find common ground to address this important issue in a bipartisan, timely and thoughtful way."

Fannie Mae quickly telegraphed its satisfaction over adoption of the amendment limiting the new regulator's authority over the companies' mortgage holdings. The amendment "clarifies an important aspect of regulatory discretion" over the portfolios, company spokesman Brian Faith said in a statement.

Fannie Mae and Freddie Mac were created by Congress to pump money into the mortgage market by buying home loans from banks and other lenders, to keep interest rates low and make home ownership affordable for more people. The companies bundle the mortgages into securities for sale on Wall Street.